We could soon be witnessing a slide in premiums for luxury flats, in some parts of London as an oversupply of properties erode prices.
For the price of a small town in West Yorkshire, you can buy a pokey hole in the capital!
The latest warning of a bubble at the top of the property market has been reported by LCP, (LCP, advises investors, and runs funds for the residential market). According to this source, new-build properties had been selling at a premium of as much as twenty-five per-cent.
It is the opinion of LCP that new-build oversupply in inner London, especially on areas like Battersea in the east, to Nine Elms in the west, where there is an estimated 22,000 units being built, will take a toll on prices, with new-build premiums being eroded. This is likely to bring them back in line with average market prices.
Buyers are paying a significant premium for new build in London, compared with older units. The average square foot price for Central London for a new property is £1,701 compared with an older property at £1,418.
This will eventually shrink over time as new build properties grow in price much more slowly than older ones, thus creating greater volatility in times of crises, (Source, International Business Times).
Downward corrections in prices occur in the market during financial crisis, shrewd investors buying at this time often see decent profits. Older properties in London can see a much more stable appreciation; undertaking a refurbishment may work out cheaper than paying a premium on a new-build. This type of investment often sees an uplift in value.
The Office for National Statistics said the average house price in London hit £536,000 in December 2015 after rising 9.4% over the year. For England as a whole the average increased 7.3% to a £301,000, according to one source, whilst the Nationwide puts average house prices at £196,930. Stamp duty changes introduced in 2014 has increased the upfront cost of buying a property priced at £937,500 with a new surcharge to add in April 2016. This will likely impact on buyers from home and abroad. One buying agent Henry Pryor, (a buying agent for wealthy clients), said developers had exhausted the market for oversea buyers, (Source, theguardian).
The chronic shortage of supply in the rest of the country is continuing to nudge up prices, the annual rate of growth has remained between 3% and 5% since the summer of 2015, (Source, Property Wire).
There is still a marked regional disparity between London, where prices continue to rise, and the rest of the country. In West Yorkshire, there are areas where you can still pick up houses for less than £50k!
Confidence in the market remains shaky though, amongst fears of a Brexit, which could have a significant effect on the market in the run up to the referendum.
If you need to sell your house fast, then please do get in touch with us.